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Equitable Group reports record 2012 earnings on continued solid quarterly growth

TORONTO, Feb. 26, 2013 /CNW/ - Equitable Group Inc. (TSX: ETC and ETC.PR.A) ("Equitable" or the "Company") today reported record earnings for the
12 months ended December 31, 2012 as solid growth continued in the
fourth quarter.

2012 SUMMARY

Net income increased 31% to a record $81.2 million from $62.2 million in
2011

Diluted earnings per share ("EPS") increased 32% to $5.11 from $3.88 in
2011

Return on Equity ("ROE") increased to 18.7% from 16.5% in 2011

Book value per share increased 18% to $29.83 from $25.18 at December 31,
2011

Adjusted for certain non-recurring items in 2011 and 2012, diluted EPS
increased by 17.7% in 2012, and ROE increased to 17.9% in 2012 from
17.4% for 2011.

FOURTH QUARTER SUMMARY

Net income grew 18% to $20.1 million from $17.0 million in the fourth
quarter of 2011

Diluted EPS increased 18% to $1.26 from $1.07 in the fourth quarter of
2011

ROE was 17.3% and unchanged from a year ago

"Equitable delivered record results in 2012 and ended the year as we
started - with another solid quarter of earnings growth driving
outstanding ROE performance," said Andrew Moor, President and CEO. "ROE
is a tell-tale sign of the effectiveness of our strategies and at 18.7%
for the year, provides the most important indicator of our progress and
potential. Our five-year ROE average now stands at 17.1%, demonstrating
a clear track record of consistently creating value for our
shareholders. We are also pleased to note that even with two dividend
increases in 2012, we retained approximately 90% of net income
available for common shareholders to fuel future growth with the result
that book value also increased 18%. We will follow this winning formula
to create substantial value for our shareholders in coming quarters."

FOURTH QUARTER OPERATING HIGHLIGHTS

Core Lending mortgage principal(comprised of Single Family and Commercial Lending) amounted to $5.2
billion, up 21% or $895 million year over year, while fourth quarter
Core Lending production increased 17% year over year to $649 million

Single Family Lending Services mortgage principal grew 46% to a record $3 billion at year-end 2012 and
represented 59% of Core Lending mortgage principal compared to 49% a
year ago. Single Family Lending Services fourth quarter production of $458 million
was 27% higher than in the fourth quarter of 2011

Commercial Lending Services mortgage principal was $2.1 billion at year-end 2012 compared to $2.2
billion a year ago. Fourth quarter production was $190 million, down
marginally from $193 million a year ago

Securitization Financing mortgage principal increased 3% or $143 million from Q4 of 2011 to $5.4
billion at year-end 2012. Fourth quarter production was up
year-over-year by 567% to $511 million, which reflected the Company's
renewed emphasis on the business. Also in the quarter, the Company
securitized $171 million of mortgages that qualified for balance sheet
de-recognition, on which it earned $1.2 million of gains on sale.

Realized net loan losses were just $0.4 million in the fourth quarter or
less than 0.7 basis points of non-securitized mortgage principal,
reflecting the quality of the Company's mortgage portfolio, and its
diligent credit management and collection efforts. Other fourth quarter
credit metrics were also solid:

Mortgages in arrears 90 days or more were 0.32% of total principal
outstanding at quarter end, in line with historical norms but above
0.22% a year ago, while early stage delinquencies - a leading indicator
of losses - were 0.31% compared to 0.30% of total principal at
September 30, 2012 and 0.22% a year ago

Net impaired mortgages were just 0.30% of total mortgage assets at
year-end 2012 down from 0.35% at the end of the third quarter and 0.25%
a year ago

For all of 2012, the Company realized net loan losses of $1.0 million,
down 88% from $8.6 million in 2011.

DIVIDEND DECLARATIONS

The Company's Board of Directors today declared a quarterly dividend in
the amount of $0.14 per common share, payable April 4, 2013, to common
shareholders of record at the close of business March 15, 2013. This
amount is consistent with the latest dividend increase announced in the
second quarter of 2012 and is 17% higher than the dividends declared in
the fourth quarter of 2011. In total, the Company increased its
dividends declared to $0.52 per common share in 2012 from $0.45 in 2011
reflecting, in part, the Board's assessment of Equitable's ability to
fund future asset expansion and its positive outlook.

The Board declared a quarterly dividend in the amount of $0.453125 per
preferred share, payable March 31, 2013, to preferred shareholders of
record at the close of business March 15, 2013.

CAPITAL

Equitable Trust's year-end 2012 total capital ratio was 17.4%, well in
excess of current and proposed regulatory minimums. During the fourth
quarter, the Company successfully raised $65 million of debentures at a
rate of 5.399% in anticipation of upcoming debt maturities and
redemptions, and in advance of new rules for capital instruments that
came into effect for most Canadian financial institutions in 2013. This
additional capital caused Equitable's total capital ratio and its
interest expenses to increase during the final quarter of 2012. On
January 3, 2013, Equitable repaid a $12.5 million term loan and $9.5
million of subordinated debentures, bearing interest rates of 6.41% and
7.1% interest respectively. Interest expenses on debentures and term
loans will consequently decline slightly in the first quarter of 2013
compared to the fourth quarter of 2012. The Company will begin to
report new capital metrics required by Basel III and Canadian
regulators such as Common Equity Tier I ("CET1") beginning in the first
quarter of 2013. The minimum CET1 standard is 7.0%. On a pro forma
basis, Equitable Trust's CET1 ratio was 12.2% at year-end 2012.

LOOKING AHEAD

Equitable entered 2013 with good momentum and strong capital levels,
which provide it with the ongoing potential to grow earnings and
deliver ROE in the high teens. The Company will continue to create
value by providing outstanding service and thoughtful product solutions
to the Canadian alternative mortgage marketplace.

"The ability to generate higher earnings at a consistently attractive
ROE is well-entrenched at Equitable and we believe we can continue to
demonstrate it in today's mortgage marketplace," said Mr. Moor.
"Entering 2013, we are well aware of softening in segments of Canadian
real estate but believe that we have effective risk mitigation
strategies in place, including the emphasis we've placed on urban
centres with positive economic and demographic prospects. Furthermore,
our potential is strengthened by our growing relationships with the
country's mortgage brokers and the enhanced competitive position we now
enjoy as a result of recent marketplace reaction to regulatory changes.
These factors are leading more consumers to seek our product solutions.
In short, all of the ingredients are in place for ongoing value
creation."

The Company expects non-interest expenses to increase in 2013 to a level
that supports the efficient growth of the business and sustains high
levels of customer and broker service while allowing for continued
strength in its operating margins.

"We expect NIM to remain stable in 2013," said Tim Wilson, Vice
President and CFO. "Overall NIMs should benefit from the ongoing
emphasis we've placed on growing our Core Lending book and the
resulting shift to higher return single family mortgages. The
combination of stable NIMs and our operational efficiency supports
further performance improvements as we grow. While changes in business
mix in favour of single family mortgage lending and the regulatory
environment have added to expense levels, our productivity ratio of
30.2% in 2012 puts us among the most cost-effective lenders in Canada."

EQUITABLE BANK

To support its strategy, in 2013 Equitable Trust also intends to apply
to the Office of the Superintendent of Financial Institutions Canada
("OSFI") and to the Minister of Finance for consent to convert from a
trust company operating under the Trust and Loans Companies Act to a
Schedule I bank operating under the Bank Act. If approved, Equitable
Trust intends to operate as Equitable Bank. The Company believes that,
in the longer term, operating as a bank will support the development of
the business, promote efficiencies, appeal to a new generation of
borrowers and depositors, and may provide advantages in raising
capital. Such a conversion would have no impact on Equitable's strong
capital position or its current business model. The conversion
application requires approvals from OSFI and the Minister of Finance,
Canada. There is no assurance as to when or if these approvals will be
received.

Q4 CONFERENCE CALL

The Company will hold its fourth quarter conference call and webcast at
10:00 a.m. ETWednesday, February 27, 2013. To access the call live,
please dial in five minutes prior to 416-644-3415.

To access a listen-only version of the webcast, please log on to www.equitabletrust.com under Investor Relations. A replay of the call will be available until
March 6, 2013 and it can be accessed by dialing 416-640-1917 and
entering passcode 4590933 followed by the number sign. The webcast will
also be archived on the Company's website for three months.

CONSOLIDATED BALANCE SHEETS

($ THOUSANDS)

As at December 31

2012

2011

Assets

Cash and cash equivalents

$

379,447

$

170,845

Restricted cash

63,601

83,156

Securities purchased under reverse repurchase agreements

78,551

9,967

Investments

439,480

390,340

Mortgages receivable

5,266,591

4,262,147

Mortgages receivable - securitized

5,342,881

5,314,940

Securitization retained interests

7,263

-

Other assets

23,626

25,618

$

11,601,440

$

10,257,013

Liabilities and Shareholders' Equity

Liabilities:

Deposits

$

5,651,717

$

4,627,904

Securitization liabilities

5,261,670

5,100,921

Obligations under repurchase agreements

9,882

-

Deferred tax liabilities

5,498

7,790

Other liabilities

40,931

28,587

Bank term loan

12,500

12,500

Debentures

117,671

52,671

11,099,869

9,830,373

Shareholders' equity:

Preferred shares

48,494

48,494

Common shares

134,224

129,771

Contributed surplus

5,003

4,718

Retained earnings

323,737

254,006

Accumulated other comprehensive loss

(9,887)

(10,349)

501,571

426,640

$

11,601,440

$

10,257,013

CONSOLIDATED STATEMENTS OF INCOME

($ THOUSANDS, EXCEPT PER SHARE AMOUNTS)

Years ended December 31

2012

2011

Interest income:

Mortgages

$

245,122

$

206,987

Mortgages - securitized

214,613

213,604

Investments

10,272

10,307

Other

6,520

4,403

476,527

435,301

Interest expense:

Deposits

131,042

115,314

Securitization liabilities

184,260

181,694

Bank term loans

813

812

Debentures

4,212

3,493

Other

30

217

320,357

301,530

Net interest income

156,170

133,771

Provision for credit losses

7,992

7,183

Net interest income after provision for credit losses

148,178

126,588

Other income:

Fees and other income

3,970

3,545

Net gain on investments

629

144

Gains on securitization activities and income from securitization
retained interests

Change in obligations related to investment sold under repurchase
agreements

9,882

-

Net change in securities purchased and sold under reverse repurchase
agreements

(68,584)

64,941

Net change in securitization liability

160,749

569,241

Net interest income, excluding non-cash items

(192,678)

(176,923)

Interest received

474,547

431,207

Interest paid

(305,303)

(264,312)

Other assets

(942)

(28,756)

Other liabilities

6,854

5,981

Dividends received

23,434

10,028

Cash flows (used in) from operating activities

(139,280)

77,035

CASH FLOWS FROM FINANCING ACTIVITIES

Issuance of debentures

65,000

-

Dividends paid on preferred shares

(3,625)

(3,625)

Dividends paid on common shares

(6,709)

(5,853)

Proceeds from issuance of common shares

3,068

943

Cash flows from (used in) financing activities

57,734

(8,535)

CASH FLOWS FROM INVESTING ACTIVITIES

Purchase of investments

(230,037)

(138,934)

Proceeds on sale or redemption of investments

185,456

105,730

Net change in Canada Housing Trust re-investment accounts

(19,901)

(20,762)

Change in restricted cash

19,555

3,414

Proceeds from loan securitization

335,661

-

Securitization retained interests

212

-

Purchase of capital assets

(798)

(2,345)

Cash flows from (used in) investing activities

290,148

(52,897)

Net increase in cash and cash equivalents

208,602

15,603

Cash and cash equivalents, beginning of year

170,845

155,242

Cash and cash equivalents, end of year

$

379,447

$

170,845

ABOUT EQUITABLE GROUP INC.

Equitable Group Inc. is a niche mortgage lender. Our primary business is
first charge mortgage financing, which we offer through our wholly
owned subsidiary, The Equitable Trust Company. Founded in 1970,
Equitable Trust is a federally incorporated trust company. It actively
originates mortgages across Canada. It serves single family, small and
large commercial borrowers and their mortgage advisors. It also serves
the investing public as a provider of insured Guaranteed Investment
Certificates. Equitable Trust is active in providing GICs across all
Canadian provinces and territories. Equitable Group's shares are traded
on the Toronto Stock Exchange under the symbols ETC and ETC.PR.A
respectively. Visit the Company on line at www.equitabletrust.com and click on Investor Relations.

CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS

Statements made by the Company in the sections of this report including
those entitled "Looking Ahead", in other filings with Canadian
securities regulators and in other communications include
forward-looking statements within the meaning of applicable securities
laws ("forward-looking statements"). These statements include, but are
not limited to, statements about the Company's objectives (including
the proposal to convert Equitable Trust into a Schedule I Bank),
strategies and initiatives, financial result expectations and other
statements made herein, whether with respect to the Company's
businesses or the Canadian economy. Generally, forward-looking
statements can be identified by the use of forward-looking terminology
such as "plans", "expects" or "does not expect", "is expected",
"budget", "scheduled", "planned", "estimates", "forecasts", "intends",
"anticipates" or "does not anticipate", or "believes", or variations of
such words and phrases which state that certain actions, events or
results "may" , "could", "would", "might" or "will be taken", "occur"
or "be achieved." Forward-looking statements are subject to known and
unknown risks, uncertainties and other factors that may cause the
actual results, level of activity, closing of transactions, performance
or achievements of the Company to be materially different from those
expressed or implied by such forward-looking statements, including but
not limited to risks related to capital markets and additional funding
requirements, fluctuating interest rates and general economic
conditions, legislative and regulatory developments, the nature of our
customers and rates of default, and competition as well as those
factors discussed under the heading "Risk Management" in the
Management's Discussion and Analysis and in the Company's documents
filed on SEDAR at www.sedar.com. All material assumptions used in making forward-looking statements are
based on management's knowledge of current business conditions and
expectations of future business conditions and trends, including their
knowledge of the current credit, interest rate and liquidity conditions
affecting the Company and the Canadian economy. Although the Company
believes the assumptions used to make such statements are reasonable at
this time and has attempted to identify in its continuous disclosure
documents important factors that could cause actual results to differ
materially from those contained in forward-looking statements, there
may be other factors that cause results not to be as anticipated,
estimated or intended. Certain material assumptions are applied by the
Company in making forward-looking statements, including without
limitation, assumptions regarding its continued ability to fund its
mortgage business at current levels, a continuation of the current
level of economic uncertainty that affects real estate market
conditions, continued acceptance of its products in the marketplace, as
well as no material changes in its operating cost structure and the
current tax regime. There can be no assurance that such statements will
prove to be accurate, as actual results and future events could differ
materially from those anticipated in such statements. Accordingly,
readers should not place undue reliance on forward-looking statements.
The Company does not undertake to update any forward-looking statements
that are contained herein, except in accordance with applicable
securities laws.